A first-principles-based dynamic Monte Carlo simulation method is used to examine the effect of alloying Pd and Au on the kinetics of ethylene hydrogenation over well-defined Pd and Pd/Au surfaces. The surface reaction kinetics is a strong function of the adsorbate-metal and adsorbate-adsorbate interactions. An intrinsic kinetic database for all of the reactant, intermediate, and product species over Pd(111) and Au(111) was established from ab initio quantum chemical calculations. Density functional theory (DFT) calculations at higher coverages were used to determine the through-space and through-surface intermolecular interactions and parametrize semiempirical models to describe these interactions. Through-surface interactions were calculated using a bond-order conservation (BOC) model. Through-space interactions were modeled using the van der Waals contribution term in the Merck molecular force field (MMFF). The parameters of BOC and MMFF models were regressed against DFT data taken at different coverages to ensure their fit to the ab initio results. The models are called from within the simulation to estimate lateral interaction effects on the binding energies, reaction energies, and activation barriers at each surface site. A multisite variable time step Monte Carlo algorithm which incorporates both interaction models is used to simulate ethylene hydrogenation over Pd(111) and Pd/Au(111) surfaces with compositions of 6.25% Au and 12.5% Au. The simulation results show that the normalized turnover frequencies for ethane production over Pd and Pd/Au alloys are nearly the same. The simulated apparent activation energies for ethylene hydrogenation range from 6.88 to 7.76 kcal/mol for three systems studied. The simulation results indicate that the kinetics of ethylene hydrogenation is not affected by alloying Au onto Pd. This is in reasonable agreement with known experimental results. The simulation results also show that ethylene hydrogenation is sensitive to the surface coverages and binding energies of hydrogen and ethylene. Increasing the surface composition of Au weakens the strength of the metal-hydrogen and metal-carbon bonds; this increases the intrinsic hydrogenation activity. Increasing the surface composition Au, however, shuts down sites for H2 adsorption and activation. These two effects tend to compensate each other. The apparent turnover frequency, therefore, remains nearly constant with Au composition up to 12.5%.